Then what is the correct source of laws and ethics?
Reason.
Through Reason, one can identify "ought's" that are non-contradictory and consistent.
(And this also presupposes an acceptance of the existence of free will. Without that, one cannot be a libertarian or an advocate of freedom.)
Reason is the real and correct source of the natural rights to life, liberty and property.
Not observation, evidence, feelings, statistics or data. If that is so, then slapping someone and saying "See? I just slapped that person and felt good about it, and hence he doesn't have rights" would be a valid thing to say.
And one cannot argue about the absence of Reason without using it in the first place, making the endeavour a falsehood.
And from these rights, the principles of self-ownership, non-aggression, natural justice, presumption of innocence, homesteading, proportionality, punishment et al are derived.
And these principles serve as the correct foundation of the law, which all human beings abide by.
And the law is simply a set of ought's, violating which opens the violator to a sanction of violence.
A true liberal, or someone who will be called a libertarian in contemporary times, will hold the view that only the defense of the natural rights to life, liberty and property is valid grounds for the use of violence.
Based on this, the modern liberal policy recommendations fall apart:
Homesteading and just assignment of property rights is the correct solution for the problem of public goods.
There is no such thing as market failures except in cases where natural rights are violated.
There is only government failure.
Positive and negative externalities are subject to the defense of natural rights.
There is no asymmetry of information because no-one can possibly know everything all at once.
Cost-benefit analysis is not grounds for the violation of natural rights.
Culture, custom and tradition is acceptable only where natural rights are not violated and subject to reform in areas where they are.
Revolutions and wars which violate these rights are principles are unjust.